SILPPI CONSTRUCTIONS CONTRACTORS versus UNION OF INDIA AND ANR. ETC. ETC. on 21 June 2019

SUPREME COURT REPORTS

[2019] 10 S.C.R.

ATHE SILPPI CONSTRUCTIONS CONTRACTORS

v.

UNION OF INDIA AND ANR. ETC. ETC.

(Special Leave Petition (Civil) Nos.13802-13805 of 2019)

BJUNE 21, 2019

[DEEPAK GUPTA AND SURYA KANT, JJ.]

Writ Jurisdiction: Scope of interference in contractual mattersinvolving State instrumentalities – Held: Courts should exercise alot of restraint while exercising their powers of judicial review inCcontractual or commercial matters – The writ courts should not easilyinterfere in commercial activities just because public sectorundertakings or government agencies are involved – No doubt, thebodies which are State within the meaning of Art.12 of theConstitution are bound to act fairly and are amenable to the writDjurisdiction of superior courts but this discretionary power must beexercised with a great deal of restraint and caution – Constitutionof India – Arts.32 and 226.

Administrative Law: Contracts involving technical issues –Judicial review – Scope of interference – In contracts involvingEtechnical issues, the courts should be even more reluctant becauseof lack of expertise to adjudicate upon technical issues beyondtheir domain – Courts should not use a magnifying glass whilescanning the tenders and make every small mistake appear like abig blunder – Courts must also not interfere where such interferencewill cause unnecessary loss to the public exchequer – Courts should F

give way to the opinion of the experts unless the decision is totallyarbitrary or unreasonable – The authority which floats the contractor tender, and has authored the tender documents is the best judgeas to how the documents have to be interpreted – If two interpretationsare possible then the interpretation of the author must be acceptedG– The courts will only interfere to prevent arbitrariness, irrationality,bias, mala fides or perversity.

Tata Cellular v. Union of India (1994) 6 SCC 651:[1994] 2 Suppl. SCR 122;Raunaq International Ltd.v. I.V.R. Construction Ltd. (1999) 1 SCC 492 :[1998] 3 Suppl. SCR 421;Air India Limited v. Cochin H

SILPPI CONSTRUCTIONS CONTRACTORS v.UNION OF INDIA AND ANR.

International Airport Ltd. (2000) 2 SCC 617 : [2000]1 SCR 505 ; Karnataka SIIDC Ltd. v. Cavalet IndiaLtd. (2005) 4 SCC 456 : [2005] 2 SCR 1183; MasterMarine Services (P) Ltd. v. Metcalfe & Hodgkinson(P) Ltd. (2005) 6 SCC 138 : [2005] 3 SCR 666 ; B.S.N.Joshi & Sons Ltd. v. Nair Coal Services Ltd. (2006) 11SCC 548 : [2006] 8 Suppl. SCR 11 ; Jagdish Mandalv. State of Orissa (2007) 14 SCC 517 : [2006] 10 Suppl.SCR 606; Michigan Rubber (Inda) Ltd. v. State ofKarnataka & Ors. (2012) 8 SCC 216 : [2012] 8 SCR128;Afcons Infrastructure Ltd. v. Nagpur Metro RailCorporation Ltd.(2016) 16 SCC 818 : [2016] 3 SCR551;Montecarlo v. NTPC Ltd. AIR 2016 SC 4946:[2016] 8 SCR 224 ;Municipal Corporation, Ujjain andAnother v. BVG India Ltd. and Others (2018) 5 SCC462 : [2018] 6 SCR 861; Caretel Infotech Limited v.Hindustan Petroleum Corporation Limited and Others2019 (6) SCALE 70 – relied on.

Writ Jurisdiction: Contracts entered into between privateparties – Held: Are not subject to scrutiny under writ jurisdiction.

Party/Parties: Necessary party – Tender – Rejection – Writpetition – Maintainability when all the tenderer are not parties inthe petition – In the instant case, the Division Bench of High Courtheld that writ petition was not maintainable without making all thetenderer parties to the petitions – Held: The Division Bench of theHigh Court erred in holding that in all cases challenging thedecision of the tendering authority, all the eligible tenderers shouldbe made parties – Such a broad proposition could not be laid downas an inflexible rule of law – In the instant case, the petitioner wasonly challenging the rejection of its technical bid – At this stage,the other tenderers were not necessary parties – The position maybe otherwise, if a tenderer challenges a bid awarded to another orchallenges the rejection of his bid at a later stage – The writ petitionwas maintainable even in the absence of other tenderers becausetill that stage there was no successful tenderer.

Contract: Related firms – Whether the petitioner firm and thesister company are “Related Firms”, within the meaning of Clause1.19 of the Manual of Contracts, 2007 – It is not disputed that all A

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Athe partners of the petitioner firm are the directors of the sistercompany and, therefore, there can be no manner of doubt that thepetitioner firm and the sister company are related firms having abusiness relationship – Therefore, adverse remarks made againstthe sister concern can be used against the petitioner firm.

BContract: Tender of petitioner was rejected inter alia on theground that adverse remarks were made against sister concern ofthe petitioner-tenderer in respect of workload return of ‘SS’ Classcontractors and non-renewal of its enlistment – Division Bench ofHigh Court held that the adverse remarks recorded against the sistercompany could not be gone into in the absence of any challenge byCthe sister company – Held:If the tendering authority is using anyadverse material of the sister company against the petitioner firmthen the petitioner firm would be entitled to urge that the adverseremarks were not called for or that the adverse remarks were notjustified or that the adverse remarks were not to be taken intoDconsideration while considering the tender of the petitioner firm –However, it is noted that in the instant case, the sister company notonly did not get its enlistment renewed but also did not care to evenrepresent against the adverse remarks – The eligibility criteriaprovided in the tender laid down that there should be no adverseremarks in the WLR of the competent engineering authority –EAdmittedly, there were adverse remarks in Work Load Return (WLR)of the sister company – The sister company having realised that itwould not be awarded any contract, neither got its enlistmentrenewed nor tried to submit the tender – The directors of the sistercompany tried to get over these insurmountable objections byFapplying for the tender in the name of the petitioner firm – All thedirectors of the sister company were partners in the petitioner firm– Therefore, these adverse remarks passed against the sister companycould not be ignored.

Contract: Tender – Eligibility criteria – In the instant case,Gas per the eligibility criteria for MES enlisted contractors, onlycontractors falling in “SS Class” were eligible to apply – Admittedly,the petitioner firm was not an enlisted contractor and was, therefore,required to meet the eligibility criteria for “other contractors” – Asfar as “other contractors” were concerned, they were required tomeet the same criteria as “SS” MES contractors category and theseH

contractors were specifically told that they could see enlistmentcriteria in the MES Manual Contracts – The Manual also providedcriteria for enlisting of contractors – Therefore, only companiesincorporated under the Companies Act, 1956, were eligible to beenlisted as ‘SS’ Class Contractors – Furthermore, Clause 1.5 dealtwith the documents to be submitted by the contractor for enlistmentin MES – This again would show that only limited companies couldbe enlisted in ‘SS’ Class – ‘SS’ is the highest class and for that onlyincorporated companies can apply – Therefore, the petitioner wasnot eligible to submit the tender.

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Administrative Law: Administrative decisions – Contract –Rejection of tender – Whether the appellate orders rejecting tenderswere bad since they were without reasons – Held: While rejectingthe tender the person or authority inviting the tenders is not requiredto give reasons even if it be a State within the meaning of Art.12 ofthe Constitution – These decisions are neither judicial nor quasi-judicial – If reasons are to be given at every stage, then thecommercial activities of the State would come to a grinding halt –The State must be given sufficient leeway in this regard – Constitutionof India – Art.12.

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Case Law Reference

ACIVIL APPELLATE JURISDICTION: Special Leave Petition(Civil) Nos. 13802-13805 of 2019

From the Judgment and Order dated 13.06.2019 of the High Courtof Kerala at Ernakulam in Writ Appeal No. 1375 and 1376 of 2019, WritAppeal No. 1359 of 2019 and Writ Appeal No. 1374 of 2019

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P. N. Ravindran, Sr. Adv., Ms. Suman Yadav, Rajiv A. George,Ms. B. Vijayalakshmi Menon, Advs. for the Appellant.

Vikramjit Banerjee, ASG, R. Balasubramanian, Ms. MeenakshiArora, Sr. Advs., Rajan Kr. Chaurasia, Akshay Amritanshu, BaibhavChadha, A. K. Sharma, Yugandhara Pawar Jha, Pragyan Pradip Sharma,CAtul Jha, Chandan Goswami, Ms. Rashmi Singh, Deepu Thankan, JosephKodyantra and Ms. Raji Joseph, Advs. for the Respondents.

The following Order of the Court was passed :

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1. Keeping in view the urgency of the matter, after detailed hearingthe Special Leave Petitions were dismissed and we had directed that areasoned order would follow. Hence the present order.

2. Respondent Nos. 1 and 2 issued notice inviting tenders for twoworks at Kochi. The estimated cost of the works were Rs. 53 croresEand Rs. 72 crores respectively. The petitioner “The Silppi ConstructionsContractors”, (hereinafter referred to as the firm) uploaded its competitivebid on the site and complied with all the conditions. The technical bids ofthe petitioner were rejected by the tendering authorities on 28.03.2019.The petitioner filed appeals before the appellate authority on 28.03.2019itself which were rejected on 09.04.2019.F

3. Thereafter, the petitioner filed a writ petition in the High Courtof Kerala and the main ground raised was that no reasons were giveneither while rejecting its tender or the appeals. In the counter filed to thewrit petition the stand taken by the respondents was that the petitioner’stenders were rejected since the petitioner did not satisfy the eligibilityGcriteria for submission of the bid. It was also specifically urged that asister concern of the petitioner’s firm namely “M/s Silppi Realtors andContractors Pvt. Ltd.”, (hereinafter referred to as the sister company),had not renewed its enlistment and had adverse remarks against it inrespect of workload return of ‘SS’ Class Contractors for the quarterHending September, 2017. It was urged that since the adverse remarks H

had been given to the sister company the petitioner firm could not beawarded the contract.

4. The learned single judge allowed the appeal holding that theorder passed by the appellate authority was not a speaking order and,therefore, not legally sustainable. The learned single judge also observedthat the adverse remarks made against the sister company could not beused against the petitioner. The learned single judge went on to hold thatthe remarks against the sister company were not justified. The writpetition was accordingly allowed and the respondents 1 and 2 weredirected to consider the financial bid of the petitioner.

5. Respondent nos. 1 and 2 and some of the tenderers who werenot parties before the learned single judge filed writ appeals. These writappeals were allowed by the division bench holding firstly, that the scopeof interference in contractual matters is very limited; secondly, that thelearned single judge ought not to have interfered with the decision of theadministrative authorities with regard to the sister company since it wasnot shown that the said decision was mala fide; thirdly, since the sistercompany had not challenged the adverse remark the learned single judgecould not have set aside the same in the writ petition filed by the petitioner-firm; and lastly, the direction of the learned single judge to direct thetendering authorities to consider the financial bid of the petitioner virtuallymeant that the technical bid of the petitioner was accepted.

6. Aggrieved, the original writ petitioner is before us in thesepetitions. This Court in a catena of judgments has laid down the principleswith regard to judicial review in contractual matters. It is settled lawthat the writ courts should not easily interfere in commercial activitiesjust because public sector undertakings or government agencies areinvolved.

7. In Tata Cellular vs. Union of India[1], it was held that judicialreview of government contracts was permissible in order to preventarbitrariness or favouritism. The principles enunciated in this case are :- “94. …….

(1) The modern trend points to judicial restraint in administrativeaction.

1(1994) 6 SCC 651

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A(2) The Court does not sit as a court of appeal but merely reviewsthe manner in which the decision was made.

(3) The Court does not have the expertise to correct theadministrative decision. If a review of the administrative decisionis permitted it will be substituting its own decision, without theBnecessary expertise which itself may be fallible.

(4) The terms of the invitation to tender cannot be open to judicialscrutiny because the invitation to tender is in the realm of contract.

Normally speaking, the decision to accept the tender or awardthe contract is reached by process of negotiations through severalCtiers. More often than not, such decisions are made qualitativelyby experts.

(5) The Government must have freedom of contract. In otherwords, a fair play in the joints is a necessary concomitant for anadministrative body functioning in an administrative sphere orDquasi-administrative sphere. However, the decision must not onlybe tested by the application of Wednesbury principle ofreasonableness (including its other facts pointed out above) butmust be free from arbitrariness not affected by bias or actuatedby mala fides.

E(6) Quashing decisions may impose heavy administrative burdenon the administration and lead to increased and unbudgetedexpenditure.”

8. In Raunaq International Ltd. vs. I.V.R. Construction Ltd.[2],this Court held that superior courts should not interfere in matters ofFtenders unless substantial public interest was involved or the transactionwas mala fide.

9. In Air India Limited vs. Cochin International AirportLtd.[3], this Court once again stressed the need for overwhelming publicinterest to justify judicial intervention in contracts involving the State and Gits instrumentalities. It was held that Courts must proceed with greatcaution while exercising their discretionary powers and should exercisethese powers only in furtherance of public interest and not merely onmaking out a legal point.

2(1999) 1 SCC 492H3(2000) 2 SCC 617

10. In Karnataka SIIDC Ltd. vs. Cavalet India Ltd.[4] it washeld that while effective steps must be taken to realise the maximumamount, the High Court exercising its power under Article 226 of theConstitution is not competent to decide the correctness of the saleaffected by the Corporation.

11. In Master Marine Services (P) Ltd. vs. Metcalfe &Hodgkinson (P) Ltd.[5] it was held that while exercising power of judicialreview in respect of contracts, the Court should concern itself primarilywith the question, whether there has been any infirmity in the decision-making process. By way of judicial review, Court cannot examine detailsof terms of contract which have been entered into by public bodies orState.

12. In B.S.N. Joshi & Sons Ltd. vs. Nair Coal Services Ltd.[6] itwas held that it is not always necessary that a contract be awarded tothe lowest tenderer and it must be kept in mind that the employer is thebest judge therefor; the same ordinarily being within its domain. Therefore,the court’s interference in such matters should be minimal. The HighCourt’s jurisdiction in such matters being limited, the Court should normallyexercise judicial restraint unless illegality or arbitrariness on the part ofthe employer is apparent on the face of the record.

13. In Jagdish Mandal vs. State of Orissa[7]it was held:

“22. Judicial review of administrative action is intended to preventarbitrariness, irrationality, unreasonableness, bias and mala fides.Its purpose is to check whether choice or decision is made“lawfully” and not to check whether choice or decision is “sound”.When the power of judicial review is invoked in matters relatingto tenders or award of contracts, certain special features shouldbe borne in mind. A contract is a commercial transaction.Evaluating tenders and awarding contracts are essentiallycommercial functions. Principles of equity and natural justice stayat a distance. If the decision relating to award of contract is bonafide and is in public interest, courts will not, in exercise of power of judicial review, interfere even if a procedural aberration or error 4 (2005) 4 SCC 456

5 (2005) 6 SCC 138

6 (2006) 11 SCC 548

7 (2007) 14 SCC 517

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940SUPREME COURT REPORTS

Ain assessment or prejudice to a tenderer, is made out. The powerof judicial review will not be permitted to be invoked to protectprivate interest at the cost of public interest, or to decide contractualdisputes. The tenderer or contractor with a grievance can alwaysseek damages in a civil court. Attempts by unsuccessful tendererswith imaginary grievances, wounded pride and business rivalry, toBmake mountains out of molehills of some technical/proceduralviolation or some prejudice to self, and persuade courts to interfereby exercising power of judicial review, should be resisted. Suchinterferences, either interim or final, may hold up public works foryears, or delay relief and succour to thousands and millions andCmay increase the project cost manifold……..”

14. In Michigan Rubber (India) Ltd. vs. State of Karnataka& Ors.[8] it was held that if State or its instrumentalities acted reasonably,fairly and in public interest in awarding contract, interference by Courtwould be very restrictive since no person could claim fundamental rightDto carry on business with the Government. Therefore, the Courts wouldnot normally interfere in policy decisions and in matters challenging awardof contract by State or public authorities.

15. In Afcons Infrastructure Ltd. vs. Nagpur Metro RailCorporation Ltd.[9]it was held that a mere disagreement with the decision-Emaking process or the decision of the administrative authority is no reasonfor a constitutional Court to interfere. The threshold of mala fides,intention to favour someone or arbitrariness, irrationality or perversitymust be met before the constitutional Court interferes with the decision-making process or the decision. The owner or the employer of a project,having authored the tender documents, is the best person to understandFand appreciate its requirements and interpret its documents. It is possiblethat the owner or employer of a project may give an interpretation to thetender documents that is not acceptable to the constitutional Courts butthat by itself is not a reason for interfering with the interpretation given.

16. InMontecarlovs. NTPC Ltd.[10] it was held that where aGdecision is taken that is manifestly in consonance with the language ofthe tender document or sub-serves the purpose for which the tender is 8(2012) 8 SCC 216

9(2016) 16 SCC 818; 2016 KHC 6606

10AIR 2016 SC 4946H

floated, the court should follow the principle of restraint. Technicalevaluation or comparison by the court would be impermissible. Theprinciple that is applied to scan and understand an ordinary instrumentrelatable to contract in other spheres has to be treated differently thaninterpreting and appreciating tender documents relating to technical worksand projects requiring special skills. The owner should be allowed tocarry out the purpose and there has to be allowance of free play in thejoints.

17. In Municipal Corporation, Ujjain and Anothervs. BVGIndia Ltd. and Others[11]it was held that the authority concerned is inthe best position to find out the best person or the best quotation dependingon the work to be entrusted under the contract. The Court cannot compelthe authority to choose such undeserving person/company to carry outthe work. Poor quality of work or goods can lead to tremendous publichardship and substantial financial outlay either in correcting mistakes orin rectifying defects or even at times in re-doing the entire work.

18. Most recently this Court in Caretel Infotech Limited vs.Hindustan Petroleum Corporation Limited and Others[12] observedthat a writ petition under Article 226 of the Constitution of India wasmaintainable only in view of government and public sector enterprisesventuring into economic activities. This Court observed that there arevarious checks and balances to ensure fairness in procedure. It wasobserved that the window has been opened too wide as every small orbig tender is challenged as a matter of routine which results in governmentand public sectors suffering when unnecessary, close scrutiny of minutedetails is done.

19. This Court being the guardian of fundamental rights is dutybound to interfere when there is arbitrariness, irrationality, mala fidesand bias. However, this Court in all the aforesaid decisions has cautionedtime and again that courts should exercise a lot of restraint while exercisingtheir powers of judicial review in contractual or commercial matters.This Court is normally loathe to interfere in contractual matters unless aclear-cut case of arbitrariness or mala fides or bias or irrationality ismade out. One must remember that today many public sectorundertakings compete with the private industry. The contracts enteredinto between private parties are not subject to scrutiny under writ 11(2018) 5 SCC 462122019 (6) SCALE 70

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Ajurisdiction. No doubt, the bodies which are State within the meaning ofArticle 12 of the Constitution are bound to act fairly and are amenable tothe writ jurisdiction of superior courts but this discretionary power mustbe exercised with a great deal of restraint and caution. The Courts mustrealise their limitations and the havoc which needless interference incommercial matters can cause. In contracts involving technical issuesBthe courts should be even more reluctant because most of us in judges’robes do not have the necessary expertise to adjudicate upon technicalissues beyond our domain. As laid down in the judgments cited abovethe courts should not use a magnifying glass while scanning the tendersand make every small mistake appear like a big blunder. In fact, theCcourts must give “fair play in the joints” to the government and publicsector undertakings in matters of contract. Courts must also not interferewhere such interference will cause unnecessary loss to the publicexchequer.

20. The essence of the law laid down in the judgments referred toDabove is the exercise of restraint and caution; the need for overwhelmingpublic interest to justify judicial intervention in matters of contract involvingthe state instrumentalities; the courts should give way to the opinion ofthe experts unless the decision is totally arbitrary or unreasonable; thecourt does not sit like a court of appeal over the appropriate authority; the court must realise that the authority floating the tender is the bestEjudge of its requirements and, therefore, the court’s interference shouldbe minimal. The authority which floats the contract or tender, and hasauthored the tender documents is the best judge as to how the documentshave to be interpreted. If two interpretations are possible then theinterpretation of the author must be accepted. The courts will onlyFinterfere to prevent arbitrariness, irrationality, bias, mala fides orperversity. With this approach in mind we shall deal with the presentcase.

21. It has been urged by the learned counsel for the petitioner thatthe Division Bench of the High Court erred in holding that the writ petition Gwas not maintainable without making all the tenderers parties to thepetition. At the outset, we may state that the Division bench of the HighCourt has held that in all cases challenging the decision of the tenderingauthority, all the eligible tenderers should be made parties. We do notthink such a broad proposition could be laid down as an inflexible rule oflaw. Supposing the tender documents are not sold/delivered to a partyHwanting to submit a tender, in such a case the other tenderers would not

be necessary parties. In the present case the petitioner was onlychallenging the rejection of its technical bid. At this stage the othertenderers were not necessary parties. The position may be otherwise ifa tenderer challenges a bid awarded to another or challenges the rejectionof his bid at a later stage. In our view the writ petition was maintainableeven in the absence of other tenderers because till that stage there wasno successful tenderer. Who are the necessary parties will depend uponthe facts of each case.

22. It was next urged that the Division Bench erred in holding thatthe adverse remarks recorded against the sister company could not begone into in the absence of any challenge by the sister company. Weaccept this contention. In our considered view if the tendering authorityis using any adverse material of the sister company against the petitionerfirm then the petitioner firm would be entitled to urge that the adverseremarks are not called for or that the adverse remarks are not justifiedor that the adverse remarks cannot be taken into consideration whileconsidering the tender of the petitioner firm.

23. We then come to the moot question as to whether the petitionerfirm and the sister company are “Related Firms”, within the meaning ofClause 1.19 of the Manual of Contracts, 2007. The said Clause readsas follows :- 1.19 Related firms (a) In the trade of works contracts, “business relationship” is themost important factor. This is corroborated with the provisionto be made in the notice of tender as such a Contractor orCorporation, wishing to be registered as an approved Contractor,should give particulars of all MES registered Contractors withwhom he/it has business relationship, irrespective of the factwhether there is blood/close relationship or not. These wouldinclude all sister concerns of the Contractor or Corporationalso.

(b) In case of Contractors having blood/close relation with eachother but not any business relation whatsoever, particulars ofsuch related contractors need not be given under serial no.7 ofthe enlistment form. In such cases, it would not be correct todeny issue of tenders to these contractors if they otherwisefulfil all requirement in selection for issue of tenders. However, A

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Awhile deciding a tender in favour of one party, it shall be ensuredthat fair competition has taken place.

(c) A Contractor/Corporation is termed to have “businessrelationship” with other Contractor(s)/ Corporation(s) when oneor more partner(s)/directors (s) are common.

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24. It is not disputed before us that all the partners of the petitionerfirm are the directors of the sister company and, therefore, there can beno manner of doubt that the petitioner firm and the sister company arerelated firms having a business relationship. Therefore, adverse remarksmade against the sister concern can be used against the petitioner firm.CTo be fair to the learned counsel for the petitioner this point was notseriously contested before us.

25. That brings us to the most contentious issue as to whether thelearned single judge of the High Court was right in holding that theappellate orders were bad since they were without reasons. We mustDremember that we are dealing with purely administrative decisions. Theseare in the realm of contract. While rejecting the tender the person orauthority inviting the tenders is not required to give reasons even if it bea state within the meaning of Article 12 of the Constitution. Thesedecisions are neither judicial nor quasi-judicial. If reasons are to begiven at every stage, then the commercial activities of the State wouldEcome to a grinding halt. The State must be given sufficient leeway inthis regard. The Respondent nos. 1 and 2 were entitled to give reasonsin the counter to the writ petition which they have done.

26. Two reasons were given by the Department. One was thatthe sister company had been given a contract for some construction inFChennai zone and there was a huge delay in the execution of the project.According to the petitioners, extension had been granted to them fromtime to time by the authorities and the grant of extension itself indicatesthat there were reasonable grounds for extension of the project and,therefore, this ground could not have been taken to reject the technicalbid.G

27. The second reason was that in another contract awarded tothe sister company, the sister company had failed to perform its part ofthe contract leading to cancellation thereof. The stand of the petitionerwas that the dispute between the parties was referred to arbitration andthe arbitrator passed an award in favour of the sister company. Hence,H

there was a finding in favour of the petitioner. According to therespondents, the award was under challenge before the Court.

28. As far as the second objection is concerned, we agree withthe petitioner that once an award has been passed in favour of thepetitioner that issue could not be used against the petitioner. The Awardbeing a binding adjudication would hold the field unless set aside.

29. However, as far as the first objection is concerned, merelybecause extension of time has been granted, it does not in any mannermean that the Department has come to the conclusion that the contractoris not at fault. Sometimes extension is granted because a lot of moneyhas already been invested and cancellation of contract and appointmentof new contractors would lead to unnecessary litigation and increase incosts. We may also point out that though we have held that the petitionerfirm can challenge the correctness of the material used against the sisterconcern, we cannot lose sight of the fact that in the present case thesister company has not got its enlistment renewed. Some of the adverseremarks were conveyed to the sister company much prior to the issuanceof notice inviting tenders in the present case. The sister company notonly did not get its enlistment renewed but also did not care to evenrepresent against the adverse remarks. It has been pointed out to usthat as per the Manual on Contracts, 2007 if any adverse remarks areconveyed to the enlisted contractor the said contractor has a right torepresent against the same. If no representation is made it is obviousthat the contractor has accepted the adverse remarks. In this case theadverse remarks were accepted by the sister company. At the least,there was acquiescence if not acceptance. Therefore, this was a factorwhich could be taken into consideration by the respondents.

30. The eligibility criteria provided in the tender lays down thatthere should be no adverse remarks in the WLR of the competentengineering authority. Admittedly, there are adverse remarks in WorkLoad Return (WLR) of the sister company. It is obvious that the sistercompany having realised that it would not be awarded any contract neithergot its enlistment renewed nor tried to submit the tender. The directorsof the sister company tried to get over these insurmountable objectionsby applying for the tender in the name of the petitioner firm. Not onlyare the names similar but as pointed above, all the directors of the sistercompany are partners in the petitioner firm. Therefore, these adverseremarks passed against the sister company could not be ignored.

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A bare reading of the eligibility criteria would clearly show that asfar as MES enlisted contractors are concerned, they should be enlistedin “SS” Category a(i) and secondly, they should not carry adverseremarks in WLR of competent engineer authority. As far as othercontractors are concerned, they are required to meet the same criteriaas “SS” MES contractors category a(i) and these contractors wasspecifically told that they could see enlistment criteria in the MES ManualContracts.

32. The Manual also provides criteria for enlisting of contractors.We are only concerned with Class “SS”. The relevant portion reads asfollows :- “……………….. ….…………….. ….……………...

1. For enlistment in class ‘SS’, the company incorporated underthe ‘Companies Act 1956’ shall only be eligible.

…….………… ………….……… ………..………..”

Therefore, only companies incorporated under the Companies Act,1956, are eligible to be enlisted as ‘SS’ Class Contractors. It is urged onbehalf of the petitioner that in various other places dealing with thedocuments required to be submitted for enlistment in MES, the termsproprietors, partners, directors have been used, meaning that even firmscan be enlisted as ‘SS’ Class contractors. We do not agree with thiscontention. The note quoted above clearly indicates that onlyincorporated companies can be enlisted as ‘SS’ Class contractors.Furthermore, Clause 1.5 deals with the documents to be submitted bythe contractor for enlistment in MES. The relevant portion reads asfollows :- “(a) ……………. ………………. ………………….

(b) Affidavit for constitution of firm (only limited companies shallbe enlisted in ‘SS’ Class).

……………….… ……………… ..……………….”

This again shows that only limited companies can be enlisted in‘SS’ Class. The Manual deals with enlistment of contractors in variousclasses. ‘SS’ is the highest class and for that only incorporated companiescan apply. Therefore, in our opinion the petitioner was not eligible tosubmit the tender.

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A33. It was faintly contended that the requirement of being acompany would be only for MES enlisted contractors and not for othercontractors. The answer to this lies in the eligibility criteria for othercontractors referred to above wherein it has been clearly mentionedthat they should meet the enlistment criteria of Class ‘SS’ MESContractors. Even otherwise it would be a travesty of justice if enlistedBcontractors should only be limited companies and unlisted unknowncontractors, could be a firm, individual etc. This is not the purpose ofthe criteria.

34. In view of the above discussion, we find no merit in thepetitions which stand dismissed vide order dated 21.06.2019.CApplication(s), if any, shall also stand dismissed.

Devika Gujral

SLPs dismissed.

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